Farming News - Wheat & Oilseed market update from ADM

Wheat & Oilseed market update from ADM

17 Jan 2020
Arable / Finance

Jonathan Lane, ADM Agriculture’s head of grain trading, comments on the wheat market

Several factors continue to underpin markets this week, including traders’ optimism over the US/China trade talks, talk of Russian export restrictions, the ongoing French transport issues and UK crop conditions and lack of sowing progress.

US prices are up about $3/t on the week, supported by talk of reduced export competition and optimism over yesterday’s signing of phase one of the US/China trade deal.

USDA produced few surprises in its recent updates. Although US and global wheat stocks were trimmed, they were in line with trade expectations.

USDA puts 2020 US winter wheat sowings at 30.8mln acres, down 1% year-on-year, and again slightly above trade estimates.

Ukraine’s 2019 grain harvest hit a record high of just over 75mln t, up from 70mln t a year earlier. As of 10 January exports were reported at 32.1mln t for the marketing year, with China being one of the largest importers.

However, rumours have surfaced about a possible export restriction on Russian wheat exports, with talk of a 20mln t limit after 31 January.

Egypt’s state buyer GASC purchased 240,000t of wheat (75% Russian/25% Romanian) for 1-10 March shipment at its latest tender. Prices rose $4-5/t above the previous purchase, much in line with the rise in the global markets.

EU prices are up about €2/t on the week, with both futures and cash markets supported by France’s transport strike, which is limiting export supplies to ports.

UK prices are up about £3/t on the week, again supported by a general supply squeeze and the firmer global tone. It is worth noting that both old and new crop values remain historically high, and ex-farm sales have picked up for both old and new crop.

Planting progress in the UK has been very patchy to non-existent. The two-week forecast for the UK looks dry, but so was last week when we saw significant rainfall in regions where drilling was becoming a possibility. A long window of drying weather is needed to allow winter wheat planting to resume and ensure ground conditions improve enough to allow spring sowing.

Will Ringrose, ADM Agriculture’s head of oilseeds, comments on the OSR market

January’s USDA report started the trading week with a bearish tone. US soybean yields were increased above trade estimates to 47.4 bushels/acre, but the harvested area was reduced. Compared to December’s report, this resulted in an 8 mln bu increase in the overall forecasted harvest figure to 3.558 bln/bu. As a result, both US and world soybean ending stocks were increased from December’s report.

South American crop estimates for Argentina and Brazil were both left unchanged at 53mln t and 123mln t respectively.

The trade then focused on yesterday’s historic signing of the phase one agreement. China agreed to purchase $40bln of US agricultural commodities per year until the end of February 2022.

However, details of the report were limited, although one point stated that market conditions would dictate the timing of purchases within a given year. Tariffs will remain in place until phase two, but waivers will be granted by the Chinese government when making purchases.

Soybeans closed 13 cents lower as the trade began to digest the 86-page document. The trade remain apprehensive about how this agreement will work if Brazilian soybeans remain so much cheaper.

Elsewhere, tensions in the Middle East have eased over the last week, resulting in lower prices in most energy markets.

Veg oil prices continued to consolidate, despite lower than anticipated December production figures of Malaysian palm oil, down 26% from a year ago. On Monday, India announced a temporary import ban on Malaysian crude palm oil and funds saw an opportunity to unwind long positions in an overbought market.

Notwithstanding, India’s coverage for edible oils is reported at a four-year low, which should create demand for other veg oils.

Matif rapeseed, having traded at its highest level seen since March 2017, also saw sharp consolidation this week. The decline of world veg oil prices also gave rapeseed markets the excuse for correction, with  Matif falling €13 from recent highs (May 20).

UK rapeseed prices began the week approximately 9% higher than at the start of December to make season highs. However, the link to Matif saw levels ease, mitigated slightly by weaker sterling. The run-up to Brexit will be key as volatile currency will impact UK farm prices.